The future of Bitcoin: a new ecosystem after the disappearance of block rewards

In the world of digital currencies, Bitcoin is undoubtedly the brightest star. As a decentralized digital currency, Bitcoin has experienced countless fluctuations and changes in the past decade. However, as time goes by, especially when the day when block rewards gradually disappear is approaching, what kind of changes will the entire Bitcoin ecosystem usher in? In this article, we will explore this issue in depth and look forward to the possible direction of Bitcoin in the future.

In the Bitcoin mechanism, block rewards are an important way for miners to obtain Bitcoin. Every time a new block is successfully mined, the miner will receive a certain amount of Bitcoin as a reward. This process is not only the cornerstone of Bitcoin network security, but also the core of its economic model. However, as the total amount of Bitcoin is limited to 21 million, block rewards will disappear at some point in the future. According to current forecasts, it is expected that the last Bitcoin will be mined around 2030, at which time block rewards will no longer exist.

This change will have a profound impact on Bitcoin miners, users, and the entire market. First, miners will have to find a new profit model. Currently, miners' income mainly comes from two parts: block rewards and transaction fees. With the disappearance of block rewards, miners will have to rely on transaction fees to maintain their operations. This means that the increase in transaction fees will be inevitable. Assuming that the use of Bitcoin continues to increase in the future and the demand for transactions surges, the transaction fees will naturally rise.

But how will the increase in transaction fees affect ordinary users? Imagine if you pay a fee that exceeds the actual transaction amount when using Bitcoin for a small payment. This will undoubtedly be frustrating. For example, if you want to buy a cup of coffee with Bitcoin and the fee is as high as several dollars, such a situation will make Bitcoin lose its appeal as an everyday payment tool. Ordinary users will begin to seek more economical alternatives, which may lead to a decline in Bitcoin usage.

However, on the other hand, the disappearance of block rewards may also promote the development of the Bitcoin network. In order to cope with the increase in transaction fees, developers may increase research and innovation in Bitcoin technology and find more efficient transaction processing methods. For example, the Lightning Network, as a second-layer solution, is designed to increase Bitcoin transaction speed and reduce transaction costs. With the advancement of technology, Bitcoin transactions will become more convenient and economical in the future, and may even re-attract users' attention.

In addition to technological advances, Bitcoin's value storage properties will also become more prominent. As block rewards disappear, Bitcoin's scarcity will become more apparent, and investors may view it as a more attractive value-preserving asset. Against the backdrop of growing economic uncertainty, more and more people may choose Bitcoin as a tool to combat inflation. Just as gold is viewed as a "safe haven asset," Bitcoin is likely to have a place in the future financial system.

Of course, after the block reward disappears, the future of Bitcoin is not all smooth sailing. As miners' income sources decrease, some small miners may exit the market, and the trend of further centralization may intensify. The monopolistic behavior of large mining pools may threaten the decentralized nature of the Bitcoin network. In addition, market volatility may also increase, and investor confidence may be affected. These will be challenges that need to be faced in the future.

In this context, Bitcoin's governance mechanism will be particularly important. With the disappearance of block rewards, how to maintain the healthy development of the network in a decentralized environment will be a problem that the entire community needs to face together. Perhaps, in the future, more community governance models will emerge so that they can respond quickly when faced with challenges.

From a broader perspective, the future of Bitcoin is not just a matter of technology and economy, it also involves social, cultural and other aspects. Bitcoin's decentralized concept is changing people's understanding of currency, value and trust. In the future, when the block reward disappears, whether Bitcoin can continue to lead this change is worth our in-depth consideration.

In this process, education and popularization are particularly important. The understanding and acceptance of Bitcoin by ordinary users will directly affect its future development. As more and more people begin to pay attention to digital currency, how to make them understand the operating mechanism, potential risks and long-term value of Bitcoin will be the direction that the entire industry needs to work hard on.

In short, Bitcoin will no longer have block rewards in a few years, and this change will have a profound impact on the Bitcoin ecosystem. Despite many challenges, it also contains infinite possibilities. Both technological progress and market adjustments are important components of Bitcoin's development. The future of Bitcoin will be a more complex and diverse digital currency ecosystem. We look forward to seeing more innovations and breakthroughs in this process.

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As its white paper explains, Bitcoin was designed as a form of electronic cash, and it is a highly volatile asset. Bitcoin has a limited supply of 21 million coins, although not all of them were issued when Bitcoin launched in 2009. Since Bitcoin's first block, the "Genesis Block," approximately 18 million of the 21 million bitcoins have been added to circulation. Each block discovered through the mining process unlocks a certain number of bitcoins, which creates a reward for those who discover new blocks, which is the block reward. So, in how many years will Bitcoin no longer have a block reward? Let the editor of the currency circle explain it to you.
 Bitcoin will no longer have block rewards in a few years
Block Reward
Reward is the reward that miners get after solving related mathematical problems and creating new blocks through computing power. The block reward varies according to different cryptocurrencies. Taking Bitcoin as an example, Bitcoin is mined at a certain but decaying rate. A new block is generated about every ten minutes. Each new block is accompanied by a certain number of new Bitcoins from scratch. The reward is halved every 210,000 blocks mined, and the cycle is four years. From the initial 50 Bitcoins/block when Bitcoin was invented to 12.5 Bitcoins/block after 2016, and will reach a total of nearly 21 million Bitcoins in 2040, after which new blocks will no longer contain Bitcoin rewards, and miners' income will all come from transaction fees.
 Block Reward Function
Let me tell you what the role of block rewards is based on the latest Filecoin block rewards.
1. For miners: Get block rewards through useful work
Storage power is the engine of the Filecoin blockchain. Miners gain storage power by dedicating hard drive space to the Filecoin network through a process called “sealing.” Sealing divides storage space into sectors dedicated to storing data on Filecoin. The more storage sectors a miner adds to the network, the more client data they are able to store, and the more Filecoin they are eligible to earn.
Miners gain the right to participate in leader elections by providing storage capacity to the network. Block rewards are weighted according to the storage capacity that Filecoin storage miners can provide and the quality multipliers of different transaction types in their storage.
Miners receive block rewards proportional to their quality adjustment power; a miner who contributes 1% of the network's overall quality adjustment power can be expected to receive approximately 1% of the block rewards over time.
Unlike traditional proof-of-work blockchains, which require miners to perform computationally intensive but useless tasks to win block rewards, Filecoin miners earn block rewards by proving that they provide reliable and useful storage to network clients. Anyone can contribute storage resources to the network and start earning rewards immediately. In addition, miners are heavily incentivized to store useful data - cryptoeconomics heavily subsidizes storage for real customers on the Filecoin network. This inspires legitimate use cases and emphasizes Filecoin's core mission of storing humanity's most important information. So, for example, a dataset that helps us study the universe or cure a disease can receive greater weight on the network.
2. For clients: Use block rewards to subsidize reliable storage
The Filecoin network is designed to provide reliable and useful storage to clients. In traditional proof-of-work blockchain miners are free to go offline at any time if they choose. In this case, they no longer receive block rewards but are otherwise unaffected. In contrast, Filecoin miners are required to provide ongoing storage services to their clients in accordance with their contractual agreements. If a Filecoin miner goes offline during the contractual period of a contract with a client, it harms the value of the service to the client and damages the health and reputation of the network.
To incentivize miners to provide stable services, the Filecoin network requires miners to put up their block rewards as collateral. If a miner terminates their contract prematurely or goes offline, the miner will be punished and the collateral will be burned in a process called "slashing." In this way, the Filecoin protocol uses block rewards not only to incentivize miners to store data in the first place, but also to store data persistently and maintain their commitment to their customers and the network.
Storage customers are entitled to share in the product of the Filecoin network because miners are incentivized to meet customer demand. It is also in the best interest of storage miners to meet demand and build applications and tools on top of Filecoin to better meet customer needs.
3. For the network: block rewards based on network utility
Many blockchains incentivize early mining by applying an exponential decay model to the rate at which miners receive block rewards. This means that mining is exponentially more profitable early in the life of a blockchain, while participation and utility tend to be lowest and then taper off rapidly. This model incentivizes storage miners to overinvest in hardware as quickly as possible during the sealing phase of mining, with little regard for the reliability and utility of their storage. Additionally, this results in the majority of network subsidies being paid out based purely on time, rather than actual storage (and therefore value) provided to the network.
To encourage consistent storage and investment in long-term storage, Filecoin not only seals quickly, but also introduces the concept of a network baseline. The concept of "network time" is defined based on the progress the network has made in meeting its baseline. Instead of minting tokens purely based on elapsed time, block rewards are scaled based on the amount of "network time" consumed. This preserves the shape of the original exponential decay model, but softens it in the earliest days of the network. The overall result is that Filecoin's rewards to miners are more aligned with the utility they and the network as a whole provide to clients.
Specifically, a hybrid exponential minting mechanism is introduced, in which part of the reward comes from simple exponential decay, i.e. "simple minting", and the other part comes from the network baseline, i.e. "baseline minting". The total reward for each period will be the sum of the two rewards. With this mechanism, mining Filecoin will be more profitable. Simple minting allocations will disproportionately reward early miners and bring counter-pressure to shocks. The baseline mining allocation will mine more tokens when more value is created for the network. When the network can unlock greater potential, more tokens will be minted to facilitate larger transactions. This will lead to an increase in network value and reduce the risk of too fast minting.
The above is the answer from the editor of Coin Circle to the question of how many years will Bitcoin no longer have block rewards. Bitcoin was created in 2009, and since its creation people have been able to mine Bitcoin on ordinary computers. In the setting of Bitcoin's creator, the number of Bitcoins that can be mined is limited, with a total of 21 million. The more Bitcoins are mined, the more difficult the algorithm that must be solved to obtain Bitcoin is. Now that more than 18.5 million Bitcoins have been mined, ordinary computers can no longer mine Bitcoin, so now mining requires special computer equipment to handle it, that is, mining machines, but these special computers require a lot of electricity to run.